The facts surrounding the state of health insurance in America are grim: The cost of health insurance premiums has increased by 59 percent since 2000, with no accompanying increase in the scale or scope of benefits. Today, 15 percent of all Americans live without health insurance. In Washington, Republicans and Democrats are at an impasse.
I propose that we look at an alternative approach, where the government lifts trade barriers imposed on the market for health insurance and forces health insurance companies to compete across state lines.
In 39 states, only one or two health insurance companies dominate the market. The lack of options available to the public gives these dominant firms monopolistic power, which results in the problems we see today: high prices and poor service.
The reason behind this imbalance can be attributed to government-imposed licensing laws that hinder companies from competing across state lines, creating barriers to trade and allowing insurance companies to price discriminate between states.
For instance, the average Georgia family pays an insurance premium of $7,408. This same plan sells for $5,096 in Iowa and for $12,296 in New York. Current state laws prevent Georgians and New Yorkers the option of buying health insurance plans available in Iowa.
President Barack Obama's proposed health care reform bill will create a system that will require an increase in government spending, causing an increase in both the deficit and taxes. Instead of a larger government-subsidized health care system, the efficient solution would be to create a market in which health insurance companies compete across state lines.
To do this, state legislatures need to recognize insurance products licensed in other states, and Congress needs to eliminate the states' ability to use licensing laws as a barrier to trade.
Competition between insurance providers in different states will lower costs, increase availability, and create an efficient market in which the American citizens' health care needs are in balance with the insurance companies' interests.
Daniel O. Post